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Inflation Inequality and the Poverty Measure

Summary:
For over half a century, the United States has measured income poverty by comparing a family’s income to a standardized dollar amount (a “poverty line”) that varies by family size. For a family of four, this poverty line was initially set at ,104 in 1963. The current official poverty line — ,701 for a family ...

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For over half a century, the United States has measured income poverty by comparing a family’s income to a standardized dollar amount (a “poverty line”) that varies by family size. For a family of four, this poverty line was initially set at $3,104 in 1963. The current official poverty line — $25,701 for a family of four in 2018 — is simply the base-1963 poverty line adjusted for nothing but inflation over the last 55 years. Today the United States is the only country in the world that measures present-day poverty by using a poverty line set over half a century ago and since then only adjusted for inflation. 

Our idiosyncratic approach to measuring poverty is deeply flawed for at least two reasons. First, poverty lines are social standards, not merely technical or mathematical ones. A poverty line set over half a century ago will reflect a very different set of assumptions, social conventions, political considerations, and body of social-science research than a poverty line first set in 2019. The initial 1963 poverty line was based on food expenditure data from 1955 and a set of assumptions that haven’t aged well, including that family meals are all prepared at home by a “frugal housewife.” (See more on this here.)

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